Transcript e-Business Networks

From Electronic Commerce to the e-Economy
– Strategies for a Digital World
Catherine Peters
Industry Canada
ITS 15th Biennial Conference
September 4-7, 2004
1
Electronic Commerce to e-Economy
Outline of Presentation
•
•
•
•
•
•
The Growth Story
ICTs, Productivity and Growth
The Internet as a Platform
e-Business Networks
Canada’s Place in the World
Canada’s Digital Economy Report
– Broadband Gaps
– e-Business Deployment
• Canada’s Challenges and Strategy Response
2
The Growth Story
“Many countries that improved growth performance
in the 1990’s did so because they have been able to
get fundamentals right; they had created an
environment that could take advantage of the new
technologies and business opportunities when they
emerged”
The New Economy Beyond the Hype,
The OECD Growth Project, OECD, 2001
3
The Growth Story
ICT-Intensive Economies led Economic Growth
Growth of GDP across OECD countries
Ireland
Finland
Canada
US
Spain
Netherlands
Sweden
Belgium
UK
France
0
2
4
6
8
10
12
Total Economy
% changes at annual rates
1990-2000
1996-2000
Source: The Sources of Economic Growth in OECD Countries, OECD, 2003
4
ICT Productivity and Growth
Historically, Technological Innovation…

Steam Engine

Railroad, Postal and Telegraph communications

Electricity

Internet and ICT Networks
• Started First industrial Revolution – Mechanized factory-based mass
production
• Changed the way goods and services were produced and distributed
as well as the mobility of people, creating the first national
economies
• Propelled the growth of industrialized economies by the
enhancement of production capacities and productivities and the
proliferation of a vast array of household goods and services
• Alters market structure and industrial organizations, similar to the
previous impact of railways and electricity
5
…has fuelled rapid economic growth
ICT Productivity & Growth
ICT-based Innovation
Percentage of Total Output Growth due ICT Capital
(Business Sector, based on harmonised price)
France
Australia
United Kingdom
Canada
Western Germany
Italy
United States
Japan
0
5
10
15
20
Percent of Total Output Growth
1990-1995
25
30
35
1995-2000
6
Source: The Sources of Economic Growth in OECD Countries, OECD, 2003
ICT Productivity & Growth
Networks enhance Productivity Growth
• The productivity derived from Metcalfe’s law is inherent in the
economics of networks, meaning that value gained from the
operation of such networks exceeds the sum total of utility to
the individual participants
• Moore’s law, combined with the networking of computers,
produces a further range of benefits as a result of the
convergence of network externalities with the massive growth
of computer processing power;
Consequently, as networks spread and as computers and artificial
intelligence becomes more and more pervasive in industrial
processes of all kinds, these positive externalities can be
captured throughout the economy.
7
The Internet as a Platform
“Everything we ever said about the
Internet is happening”
– Andrew S. Grove, Intel Corporation
8
The Internet as a Platform
Internet Usage Races Ahead
In Millions of Users
1000
921.4
900
800
830.3
700
752.6
606
600
552
500
665.4
451
562.3
400
254
300
150
200
100
55
101
0
1996
1997
1998
1999
2000
2001
2002
Actual Users*
2003
2004
2005
2006
Projected**
9
Sources: * http://www.nua.com/surveys, ** Computer Economics, June 2002
The Internet as a Platform
People are Well Connected to the Internet…
% of Population Online 2001
64%
57%
57%
52%
51%
47%
46%
43%
35%
31%
Sweden
United
States
Canada
Finland
United
Kingdom
Japan
Australia Germany
France
Italy
10
Source: World Information Technology and Services Alliance, Digital Planet 2002, February 2002
The Internet as a Platform
Businesses Also Well Connected
Businesses with Internet Access and Web Site, 2001
(Percentage of businesses with ten or more employees)
100
80
60
40
20
Have Internet access
Ita
l
C y
an
ad
a
U
ni
S
te
pa
d
i
K
in n
Lu gd
xe om
m
bo
ur
g
G
M
ex ree
ce
ic
o
(1
99
9)
D
en
m
ar
k
Fi
nl
an
d
S
w
ed
A en
us
N
ew tral
i
Ze a
al
an
d
A
us
tr
i
N a
or
N
et wa
he
y
rla
nd
s
P
or
tu
ga
l
0
Have own Web site
11
Source : OECD, Measuring the Information Economy 2002
e-Business Networks
The use of ICT by businesses is directly linked to innovation
and the transformation of business processes.
“Technological innovations can disrupt not only systems
and business models, but also organizational cultures.
Creative destruction indeed.”
Robert Bruner 2001
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e-Business Networks
E-Business has Entered the Economic Mainstream
The Economist, May 15 2004
“E-commerce will continue to
change every kind of business,
offline as well as online…”
Business Week, May 10 2004
“The Web players new assault
should keep the productivity
gains coming.”
13
E-Commerce Exceeding Expectations
$5,000.0
$4,000.0
Worldwide
E-Commerce
(U.S. $Billions)
$3,000.0
1999 Estimates
2002 Estimates
$2,000.0
$1,000.0
$1999
Note:
2000
2001
2002
2003
2004
2005
Charts reflect "Internet Commerce", a subset of electronic commerce that includes the purchase or trade of
goods and services via the Internet / World Wide Web, but excludes financial services' transactions
14
Source: International Data Corporation, 1999 and 2002
e-Business Networks
Larger Business and Economic Revolution
Underway:

Supply chain transformation (B2B)

Virtual firms

Reshaping of the consumer marketplace

Impact on industry competition

Development of new electronic marketplaces

Renewal of Public Services
 Offshoring & outsourcing
15
Source: Restructuring value chains: Impact of the Internet, EBIP, WPIE 2002
e-Business Networks
Organisational Change Critical to Make ICTs Effective
 ICT capital becomes more effective if a company is
organised to exploit it
 This takes additional investment
• US$1 investment in ICT require US$9 of
complementary investment
 Fundamental transformation of the conventional
business process
“We know that it’s a real business transformation
because it survived the economic downturn.”
Alice M. Rivlin, Brookings Institute
16
Source: ICT & Business Performance, OECD
e-Business Networks
Firm-Level Benefits from e-Business
 Reduce costs
 Increase transaction speed and reliability
 Improve management capabilities
 Develop or improve collaborative capabilities
 Create interdependencies
 Manage customer relations better
 Create more added value
17
Source: Restructuring value chains: Impact of the Internet, EBIP, WPIE 2002
The Digital Economy in Canada
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Canada’s Digital Economy
Canada’s e-Report Card: 2002
>>
Progressing
Rapidly
e-Business Readiness
>
Businesses
Online
>>
Consumers
Online
II
Progressing
>
II
Paused
Growth & Acceleration
Privacy and
Security Practices
II
>
<
e-Business
Talent
SME Adoption
e-Business
Supply
<
Falling
Behind
Investment & Image
>
Venture
Investment
>
Tax and
Regulatory
II
e-Business
Brand
19
Source: Fast Forward 4.0, Growing Canada’s Digital Economy, Canadian e-Business Initiative (CeBI), May 2003
Canada’s Digital Economy
E-Business Benefits are Captured by Canadian Firms, but
50% of SMEs have not Adopted an IBS*
Satisfaction with Internet Business
Solutions (IBS) Investment,
as % of Respondents
Don’t know
Size of Cost Reductions and Revenue
Increases Due to IBS Investment
9.5%
6.6%
7.5%
7.0%
Highly satisfactory
6.3%
55.9%
Satisfactory
Neither satisfactory
or unsatisfactory
Unsatisfactory
21.3%
8.5%
Highly unsatisfactory 1.4%
Increase in
revenue
Decrease in
cost of goods
sold
Decrease in
sales and
general
administration
expenses
20
Source: The Canadian e-Business Initiative, Net Impact Study Canada, The SME Experience, November 2002. Based on
398 Canadian enterprises with 50-500 full-time employees. *Net Impact Canada IV, 2004.
Uneven e-Business Deployment
High Business Connectivity, but Low Adoption
Rates of Advanced Online Activities
Online Business Activities in Canada - 2000-2002
2000
2001
Percentage of firms
2002
76%
Internet Access
71%
63%
32%
Web Presence
29%
26%
32%
Purchase Online
22%
18%
8%
Sell Online
7%
6%
22
Source: Survey of Electronic Commerce and Technology, Statistics Canada, April 2003.
Uneven e-Business Deployment
Not All Sectors Are Capturing the Benefits
• Six leading sectors account for 80% of all Canadian Internet Sales
• Private firm sales were $18.6 billion in 2003
• Leading e-Commerce Sectors are: Wholesale Trade, Transportation and
Warehousing, Manufacturing and Retail Trade – 67% of sales
e-Commerce Sales by Industries 2003
Professional
Services 5.8%
Finance &
Insurance 6.8%
Wholesale 24%
Other 20%
Transport &
Warehousing 18.5%
Source: Survey of Electronic Commerce and Technology 2003
Daily April 16, 2004, Statistics Canada
Retail 11.4%
Manufacturing 13.5%
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Broadband Gaps
"The broadband problem is particularly frustrating
because it is the one piece of the physical infrastructure
of computing that is limiting a 'miracle environment' of
new applications thanks to ever-increasing computer
speed, power and video-display capabilities."
Bill Gates, September 2001
Broadband Gaps
Worldwide Internet and Broadband Use Continues to Grow
Broadband and Internet use, world, millions
700
Internet
Broadband
600
Broadband as % of
Internet users
500
10.7%
7.4%
4.0%
400
1.4%
300
0.3%
200
0%
0%
100
0%
0
1995
Source: ITU
1996
1997
1998
1999
2000
2001
2002
25
Broadband Gaps
Canada is Well Positioned . . .
Broadband subscribers per 100 inhabitants
Top 10 Countries End of June 2003
23.2
Korea
14.8
Canada
14.5
Iceland
Denmark
13.1
12.3
Belgium
Netherlands
DSL
Cable
11.6
11.4
Switzerland
Other*
10.8
Sweden
10.7
Japan
9.8
United States
0
5
10
15
20
25
. . .To Adopt High-Speed
* Ethernet LANs, two-way direct satellite, fibre to the home, and fixed wireless.
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Source: OECD, ICCP Broadband Update, December 2003
Broadband Gaps
Broadband Deployment

Market problems – business case for deployment nonexistent in
rural/remote areas, in particular in low density countries such as
Canada, Australia

Relevance for community development and digital divide

Relevance for business and delivery of public services
“Broadband, or what they call high-speed Internet, is
critical in making our high-speed economy even more
productive… The goal is to be ranked 1st when it comes to
per capita use of broadband technology. It’s in our
nation’s interest. It’s good for our economy.”
President George W. Bush, Speech at the Department of Commerce,
June 24, 2004
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The growth of e-Business requires Broadband platform
and service deployment and availability
“The deployment of
broadband services would
help spur the growth of
e-commerce and vice
versa. The future is very
bright for both.”
Bruce Mehlman, U.S. Dept. of
Commerce, Aspen Institute Summit,
August 2002
“Several applications, such
as broadband and
e-commerce are still in
their early stages and may
have a large potential for
future growth.”
• Creating
Economywide Platform
for
e-Business
• Greater
Availability,
Affordability
• Increased
Capability of
Networks
Virtuous
Circle
• Increased
Sustainability
• Access for
SME’s
• Sector-wide
deployment
• Profitability
• Generating
Revenue Streams
for
Infrastructure
Investment
Meeting of the OECD Council at
Ministerial Level, Seizing the benefits of
ICT in a digital Economy, 2003
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The economic, social and cultural potential
is enormous
• Advanced networks are the key to productivity growth
– Existing businesses need them in order to grow
– New businesses become possible with them
– ICT is a major industry in its own right
• Advanced networks can deliver social programs
– Healthcare
– Education
– Government On Line
• Advanced networks offer new cultural opportunities
–
–
–
–
HDTV
Interactive video
Internet radio
Online specialty television
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The e-Economy Agenda
• Centre Canada’s economic strategy on the contribution of
networked-based information technologies
• Accelerate the rollout of broadband infrastructure
• Build a world-class intelligent infrastructure
• Ensure that Canada continues to have the world’s best legal
and policy environment for innovation
• Strengthen stakeholder partnerships and cooperation
• Develop sectoral-specific strategies for industrial e-business
adoption, particularly among SMEs
• Remove cross-border and inter-jurisdictional barriers that
inhibit the global spread of e-commerce and its benefits
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Canada’s e-Economy Targets
• Reach levels of SME e-readiness comparable to
the United States
• Continue to lead all G8 countries in access and
availability of broadband networks
• Upgrade all industrial and resource sectors and
supply chains to North American best practices for
employing e-solutions and conducting business
online
• Bring the education and health sectors to the top
rank in technology use and innovation
• Rank #1 in terms of the speed, size, functionality
and intelligence of advanced networks
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From Electronic Commerce to the e-Economy
– Strategies for a Digital World
Catherine Peters
Industry Canada
ITS 15th Biennial Conference
September 4-7, 2004
32